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10 Milestones That Changed Fleet Management

In the late 1930s and early 1940s, businesses started to migrate
from salesmen reimbursement to company-owned fleets. Since then, 10 milestones
have dramatically changed the nature of fleet.

1. Higher Content Fleet Vehicles:
In the early days of fleets, companies had a choice of three models: Ford,
Chevrolet, or Plymouth.
The typical fleet car was the standard model with minimal equipment. The
biggest selector deliberations were over the economies of installing a radio or
adding air conditioning for vehicles located below the Mason-Dixon
Line. The “Plain Jane” fleet car became a historical footnote as
OEMs bundled options into packages, allowed free-flow option ordering, and proved
that higher-content vehicles sold better in the resale market.

2. Creation of the Open-End
Lease: Early lessors offering full maintenance leases were R.A. Company,
established by David, Harry, and Nathan Robinson, and Four Wheels, founded by
Zollie Frank and Armund Schoen in 1938. Changing conditions in the 1950s led to
the development of open-end or finance leasing, which PHH offered in 1951. Fleets
wanted the ability to replace units after a 12-month period with off-balance
sheet reporting. In 1981, the Swift Dodge vs. IRS court decision legitimized
the use of the TRAC clause in an open-end lease.

3. Factory Ordering: Before
the advent of OEM fleet departments, companies purchased vehicles from individual
dealers. Use of dealer ordering codes by nondealers, such as fleet lessors,
allowed factory-direct orders. Another factory innovation was the introduction
of fleet previews to provide new-model specifications to facilitate vehicle
replacement planning.

4. Drop-Ship/Courtesy
Deliveries: In the late 1940s, the concept of volume drop-shipping fleet
vehicles was developed. At that time, PHH factory-ordered vehicles delivered to
drivers by local dealers. Wheels and McCullagh (acquired by GE) started
delivering cars from regional dealers directly to drivers. Ultimately, it
became an accepted industry practice to pay a courtesy delivery fee to
non-ordering dealers to deliver and prep vehicles.

5. Creation of Fleet
Management Services and National Account Program: The first recorded
purchase of a fleet management program, other than leasing, was by Gibson Art
in 1946. Tire company national account billing started in the early 1950s. PHH
and Consolidated Service Corp. (acquired by LeasePlan) started selling tires
nationally using centralized billing. Other programs such as maintenance management
were not in great demand because gas was cheap and operating costs were manageable.
This gradually began to change in response to market demands and new fleet
services proliferated such as fuel management, accident management, and personal
use reporting.

6. Repeal of the ITC:
Prior to the Tax Reform Act of 1986, significant tax benefits prompted
companies such as Dart & Kraft, PepsiCo, and Xerox to acquire existing
fleet leasing companies. However, as a result of the repeal of the Investment
Tax Credit (ITC), many corporate entities sold off their fleet leasing business
units. Around this time, GE entered the market as a ready buyer and initiated a
series of rapid-fire acquisitions that coalesced the industry into 10 major
fleet management companies.

7. Outsourcing: In the
1980s, the trend to outsource non-core services swept Corporate America. In
1989, PHH created the first-ever total fleet management program with Eastman
Kodak. In-house fleet departments witnessed staff reductions as administrative
services were outsourced to third-party vendors. Outsourcing also changed the
skill set required of fleet managers. In the profession’s early years, most
fleet managers had a technical or automotive background. As these fleet managers
retired, a new generation of fleet managers emerged, whose backgrounds were financial,
administrative, or managerial.

8. OEM Incentive Programs:
In the early days of fleet, the standard fleet discount was a dealer-negotiated
10 percent off list. As competition grew, OEMs developed more complicated incentive
programs, such as guaranteed depreciation protection and rifle shot programs
offering tiered volume pricing. Also, OEMs introduced holdback for dealers,
which were often rebated to fleets. In the early 1980s, OEMs started
negotiating unique and substantial incentive programs directly with individual
end users. Prior to this, fleet programs were identical for all fleets.

9. Expanded Financing
Options: In the early years, financing was straightforward and sourced from
the manufacturers at Prime or Prime plus one. In the 1970s, financial choices
emerged such as fixed- versus floating-rate financing and commercial paper.

10. Computerization: The
fleet industry could not provide its breadth of services without computers.
Wheels and PHH installed their first IBM computers in 1959. In the 1990s, fleet
quickly shifted to Web-enabled services. Computers gave lessors the capability
to evolve into full-service fleet management companies.

Other Catalysts of Change

Besides these 10 milestones, many other changes transformed fleet such
as fuel management, the creation of NAFA, fleet safety requirements, accident
management, strategic sourcing, telematics services, and the regulatory
mandates of the Clean Air Act Amendments and the Energy Policy Act.

Market Trends

While the light-duty market for compressed natural gas vehicles has almost evaporated, new near zero emissions technology and drastic reductions in infrastructure costs have reinvigorated the market for medium- and heavy-duty applications — even for smaller fleets.

A fleet cost reduction program goes straight to the corporate bottom line. If a company operates at a 10% annual net profit margin, reducing annual fleet expenses by $100,000 is the equivalent of generating $1 million in sales. Although fleet managers manage hundreds of thousands to tens of millions of dollars in corporate assets, only half are incentivized to achieve targeted performance goals. I advocate incentivization should be a universal best practice extended to all fleet managers.

I believe volume penetration of fleets by autonomous vehicles will take much longer to occur than what is predicted in today’s optimistic forecasts. Conceptually, autonomous vehicles are technologically feasible, but, as they say, the devil is in the details. One thing is certain, as we trail blaze new ground, so too will we trail blaze new problems.

Corporate mobility management to evolve into multi-level responsibilities for asset lifecycle management, administration of multi-modal mobility services, and deployment of productivity and safety tools to support a mobile workforce in the field.

The key objective of end-user discussions is to match the truck with the fleet application. Once you have completed your discussions, make sure the completed upfit specs have been reviewed and approved by all parties prior to order placement. It is critical to have a documented sign-off to avoid misunderstandings that result in after-the-fact upfitting modifications.

Recently, I conducted a survey of several hundred fleet managers to identify emerging industry trends. One recurrent theme expressed by fleet managers was the concern that fleet costs are starting to experience upward pricing pressures. Here's what they told me.

Over the years, I have known many competent fleet managers. But, like salmons swimming upstream, not every promising fleet manager survives the challenges and rigors of day-to-day fleet management. It is understandable when fleet managers are fired for making expensive mistakes or when caught engaging in ethical transgressions, but, sadly, many more are terminated for circumstances that are entirely avoidable.

Vehicle specifications should be defined by the fleet application and mission requirements. A truism in truck fleet management is to design a truck that will accommodate your operational requirements rather than trying to make your operation conform to the truck. Here's how you do it.

At a fundamental level, the fleet management industry is an aggregator of data upon which it executes actions designed to optimize vehicle asset lifecycle – from acquisition to disposal – and to fine-tune operational efficiencies to maximize employee productivity. A cognitive computing platform, such as IBM Watson, would thrive in this type of data-rich environment.

Can a branded vocational vehicle be ticketed for being parked in an employee driver’s home driveway? Or, can it be subject to a fine if legally parked overnight on the side of a street? Before you say no, think again. These discriminatory practices occur regularly when vocational vehicles are parked in residential areas governed by a homeowner association (HOA). In fact, the type of restrictions implemented against vocational or branded vehicles can run the gamut and are at the whim of the HOA.

The value of face-to-face meetings is beginning to be questioned by younger generation employees who have only known a world interconnected by the internet, social media, and FaceTime. In particular, they question the cost-effectiveness of traveling by car from point A to point B, its negative impact on corporate sustainability goals, the inefficient use of time lost behind the wheel of a vehicle, and more.

For many managers responsible for vehicle operations, fleet management is often one of several job responsibilities. These managers acknowledge that it is difficult to stay on top of changes in vehicle design, powertrains, onboard safety technology, telematics capabilities, and regulatory changes that impact fleet operations. Despite this recognition, a common mistake made by many of these managers is underutilizing the subject-matter expertise of current and/or prospective suppliers.

In the next decade, the term "fleet management" will soon become inadequate to fully define the scope of our industry and it will be viewed as an anachronistic label. Today's vehicle connectivity megatrend will be the catalyst of an expanded fleet business model focused on managing a new connected vehicle ecosystem. This fleet ecosystem will encompass not only the vehicle, but also the mobile workers and, more importantly, the work they performed and the tools they use.